The $100B+ Housing Debt Bubble Is Going To Burst
“Being self-employed, I don’t like to add extra bills or burdens, and with a moratorium, there’s no guarantee that later I won’t be further into debt.”
Lucy, freelance photographer, Colorado – July 2020
Lucy’s concern about accumulating debt echoes across America. Millions of renters and homeowners are anxious about paying both their monthly housing bill and a ballooning debt balance.
Based on present missed payment rates, consumers will accumulate at least $100B in housing debt by January 2021. The following model describes a set of linked health, social and economic events. These events are likely to unfold in next 6 months. An uncontrolled wave of virus infections drives the cascading economic impact:
Virus growth uncontrolled > economic activity contracts > unemployment rises
> personal income falls > consumers miss rent and mortgage payments
> rent and mortgage payment moratoriums fail > consumers use credit cards to make payments
> small business apartment landlords & homeowners default on mortgages (debt bubble bursts)
> consumer spending dives
Our analysis starts by examining the virus 3rd wave and a likely increase in lockdowns.
Virus Growth Uncontrolled
On November 2st the U.S. had a 44% increase in daily COVID-19 to 93,581. The chart below indicates the second wave of infections did not decline to the first wave low. Thus, experts forecast a third winter wave peak of cases will be higher than the second spring wave peak.
Hospitalizations are rising in 42 states. Nineteen states report their highest hospitalization rate since the pandemic began in March. Uncontrolled virus infections will result in more partial or full lockdowns of intense social activity businesses including, hotels, restaurants, bars, theaters, sports stadiums, indoor arenas, offices, transit, airlines, hair salons, and personal services. An indication of what the U.S. may face soon is unfolding now in the United Kingdom, Germany, and France. These EU countries are tightening pandemic restrictions at levels not seen since last June. Meantime, U.S. businesses, such as internet entertainment, technology services, eCommerce and, socially distanced grocery stores, will continue to grow…CLICK for complete article
